ETF dividend dates explained - MoneySense (2024)

FAQs

How do you read dividend dates? ›

The ex-dividend date is one business day before the record date. For example, if a company declares a dividend on March 3 with a record date of Monday, April 11, the ex-dividend date would be Friday, April 8, because it's one business day before the record date.

An ETF owns and manages a portfolio of assets. If those assets pay dividends or interest, the ETF distributes those payments to the ETF shareholders. Those distributions can take the form of reinvestments or cash. ETFs that position themselves as dividend funds generally opt for cash distributions over reinvestments.

Ex-dividend date: The day on which the stock begins trading ex-dividend, or without the dividend. It is on or after this date that the dividend is not owed to a new buyer of the stock. Date of record: The day on which the company checks its records to identify shareholders of the company.

Declaration date: The date that the board of directors announces and approves the payment of a dividend is known as the "declaration date." The declaration details the dividend amount being issued, the record date, and the payment date. Ex-dividend rate: It is the first trading day without a dividend for most stocks.

There are four dates to know when it comes to companies' dividends: the declaration date, the ex-dividend date, the record date, and the payable date. On the ex-dividend date, stock prices typically decline by the amount of the dividend.

Cons. No guarantee of future dividends. Stock price declines may offset yield. Dividends are taxed in the year they are distributed to shareholders.

ETFs pay dividends earned from the underlying stocks held in the ETF. An ETF that receives dividends must pay them to investors in cash or additional shares of the ETF. Dividends may be taxed at the long-term capital gains rate or the investor's ordinary income tax rate.

As with stocks and many mutual funds, most ETFs pay their dividends quarterly—once every three months. However, ETFs that offer monthly dividend returns are also available.

Because shares settle T+1. the ex-dividend date falls one trading day before the record date. As a result, if you own the stock before the ex-dividend date, you will receive the dividend. However, if you buy it on or after the ex-date, you will not.

Is it better to buy before or after the ex-dividend date? ›

The Bottom Line. In order to receive a dividend, you must purchase a security before the ex-dividend date. On May 28, 2024, the ex-dividend date became the same as the date of record with the move to t+1 settlement. A security tends to drop by the the dividend amount on the ex-dividend date.

The date on which an investment's dividend or capital gains income is reinvested, if requested by the shareholder, to purchase additional shares. Also known as the ex-dividend date.

Preferred stocks have a different holding period from common stocks, and investors must hold preferred stocks for more than 90 days during a 181-day period that starts 90 days before the ex-dividend date.2 The holding period requirements are somewhat different for mutual funds.

Yes — Any sale that occurs on the ex-dividend date or later will exclude the pending dividend. You will still be the owner of record in the company books when they distribute the payment. So, if you sell a stock on the ex-dividend date, you will still get the dividend about two weeks later.

Rule 3 of Dividend Rules prescribes the conditions to be complied with for declaring dividend out of reserves. A pertinent question here is – whether a company can declare dividend out of 100% of the amount that has been transferred to General Reserve.

Let's say a public company's share price is $50, and it pays annual dividends equal to $1.50 per share. To determine the dividend yield, divide the dividend amount per share by the price per share: $1.50 / $50 = 0.03. Convert the decimal to a percentage, and you get a dividend yield of 3%.

You have to own a stock prior to the ex-dividend date in order to receive the next dividend payment. If you buy a stock on or after the ex-dividend date, you are not entitled to the next paid dividend. If this sounds unfair, remember that the stock price adjusts downward to reflect the dividend payment.